"Once upon a time there was no such thing as computers, so everyone relied on paper for everything from talking with a family member overseas to paying for sweeties or getting a school bus. And then the computer was born and as computers became smarter and smarter, the need for paper slowly vanished. The new computers made almost everything we do easier, connecting us in ways we never thought imaginable. Bitcoin is part of this change from paper money to computer money."
"Bitcoins are a form of electronic currency. They cannot be seen or touched but can be swapped by trading them online - a bit like trading football cards. Bitcoins exist only on the web and are not controlled by any bank or government. They are created by a set of complex maths equations ('mined') online rather than being physically printed or minted. As more and more people begin to own them, their value increases. The amount of Bitcoins that will exist is strictly limited to 21 million. So, like trading cards, the more people start to collect and create a demand for it, the greater value each Bitcoin will have.
"Bitcoin is a bit like the new 'gold' of the Internet - offering a currency that can be used to purchase goods or services (e.g. holidays through Expedia) anywhere in the world without the need to manage different exchange rates.
"Leading Bitcoin expert Radoslav Albrecht predicts that by 2020 Bitcoin will handle as many transactions as PayPal does today. So, as people start to trust that the value of the currency will increase, they start to invest in it, further increasing demand. The Bitcoin market has clearly grown and its future potential is huge. But it is an independent currency, not yet subject to the regulations that cover other more traditional currencies. So it needs to shake off the image that it is mainly used by 'baddies' to fund criminal and terrorist activity. Some people don't think regulation is a good thing, but we think it is, showing that the currency has started to 'grow up' which will further encourage ordinary people to invest in it.
"Maybe it won't be long before you get your pocket money in Bitcoin, paid over the internet into your digital piggy bank?
"First introduced in late 2008, Bitcoin is a crypto-currency that represents a new digital form of money, and whose value has risen to $16 billion at some points over the last year. Rather than being regulated by a central bank or government, bitcoin is radically different to traditional currencies and has the potential to significantly change the way we pay online for goods and services by presenting users with a simple ecommerce experience.
"Although it is still an emerging currency, bitcoin can play a major role in helping retailers to expand their online businesses globally, without the initial limitations of cross-border hurdles. However, since bitcoin has no central bank, there have been concerns about its stability. The market is addressing this through the evolution of exchange services, and retailers should consider these to help manage the possible risks."
Established in 1957, BCS, The Chartered Institute for IT, promotes wider social and economic progress through the advancement of information...